Canada’s largest ILEC has joined with one of the smaller ones to attack AT&T Canada Inc.’s appeal of the price cap decision. SaskTel has joined with other incumbents in supporting Bell Canada’s comments, but has also filed a response on its own. This is the first reaction submitted to Cabinet since AT&T Canada launched its appeal of Telecom Decision 2002-34 (NL, Aug. 27/02). The ILECs are asking that the petition be denied, claiming it is based on misconceptions. "In effect, the petition asks the government to jettison years of highly successful regulatory policy that is based on sound economics in order to address AT&T’s financial challenges at the expense of Canada’s major incumbent telephone companies," Bell writes in a submission on behalf of it, Aliant Telecom Inc., MTS Communications Inc. and SaskTel. "It is rooted in the surprising proposition that the government’s regulatory agency is no longer competent to regulate. AT&T’s proposal would also undermine investment and innovation in a key sector just as Canada embarks on its innovation strategy." In its filing, SaskTel repeats the charge that the CLEC is merely seeking a handy respite from its financial woes. That could have implications in smaller jurisdictions like its home province, SaskTel says. "Wrapping itself in the cloak of the ‘future of competition’ and ‘competitively neutral access’ (which most other parties recognize as another term for subsidies), AT&T Canada is attempting to mask its true intent of achieving a bailout at the expense of others," John Meldrum, VP corporate counsel and regulatory affairs, writes. "Astonishingly, in its petition, AT&T Canada requests that the rates of ‘all network facilities and services’ purchased by competitors be reduced by 50 per cent. That would include, in addition to the essential facilities that may be required to enter the local services market, inter-exchange services such as private line, data and long distance. The unrealistic nature of the AT&T Canada petition is most striking in the Saskatchewan context." The company points out that, although it is subject to the same regulatory structure as the other telcos, no facilities-based competitor has seen fit to enter the Saskatchewan market. Most of the competition in the province is from inter-exchange service providers, a sector the CRTC has seen fit to forbear from regulation. The provincial ILEC scoffs at AT&T Canada’s claim that competition is threatened. "In our view, there are five distinct categories of competitors that will be competing for local service in the future," Meldrum adds. "They are: the incumbent local exchange carriers (ILECs) in their home territory; the ILEC affiliates competing outside of their home territory; the wireless service providers; the cable companies; and the competitive local exchange carriers (CLECs). Of these competitors, only the CLECs are saying they need rate discounts to survive, and even they aren’t unanimous in that request. GT Group Telecom Inc. has publicly stated that it doesn’t support AT&T Canada’s appeal." He goes on to predict that full-fledged facilities-based competition will come to Saskatchewan during the current four-year price cap period, but will be driven by cablecos and WSPs. Meldrum specifically cites Access Communications and Shaw Communications as likely rivals to SaskTel. Bell adds that competition in the wireline local market is in the early stages of development and rolling out more rapidly in the business sector than the residential market. It produces numbers showing competitors now have about 17.5 per cent market share in the ILEC’s operating territory of Ontario and Quebec, a jump from 15.9 per cent a year earlier. An appendix to the filing says the percentage of local lines served by facilities-based competitors is growing more quickly than resale-based lines. Bell submitted figures alleging the competitors have benefited to the tune of $475 million thanks to recent CRTC rulings (see table). Having received some concessions in 2002-34, the CLEC now wants an additional 50 per cent reduction in the prices competitors pay for a vast array of services. "In so doing, AT&T is essentially seeking to obtain the remainder of its original request before the commission – one that was soundly rejected in a full and open public process as being contrary to the public interest. AT&T seeks to have the full and thorough analysis of the government’s regulator summarily dismissed by the Cabinet. It also seeks to cast aside a long-standing regulatory framework that is firmly rooted in sound economic principles and has been supported by many parties, including AT&T itself, throughout the years." AT&T Canada complains that it spends 55% of its direct costs on purchasing services from the ILECs. Bell says that "demonstrates nothing." "In fact, if AT&T’s proposal were implemented, AT&T would be encouraged to lease a much greater proportion of its facilities from incumbents than it does now," the submission states. "Thus, it is quite possible that this percentage would increase with AT&T’s proposal . And presumably pure resellers like Distributel and Primus Canada (who have not complained about the decision), have a much greater proportion of their costs derived from services leased from others." SaskTel expands on its list of those that would be hurt, should Cabinet overturn 2002-34. The regulatory balance established in the decision would be affected as well."If the competitors are to get more, it is not a given that only the telephone companies should get less," Meldrum asserts. "Various aspects of this decision would need to be reviewed by the CRTC, such as the four-year rate freeze for consumers." The provincial ILEC has seen those rates frozen at a time when it is losing population while at the same time expanding services. Rollout of broadband could be seriously delayed if the telco were forced to hand more money to the CLECs. Meldrum also makes reference to the declining grain market on the prairies and the precarious position it places farm families in. "The past year has been a trying year both financially and emotionally for rural families and businesses across western Canada," he writes. "One would hope that the courage and fortitude displayed by these individuals in the face of international forces could be matched by AT&T Canada."